Answer to Question #306067 in Microeconomics for Imt

Question

5. If firm’s objective is to maximize total revenue at which point of the demand

curve will it produce and why?

Answer 1

The point of intersection between the marginal cost and the marginal revenue represents the maximum point of profit. Any further movement along the marginal cost exceeding this point leads to excess production of goods which leads to loss of revenue. Any further stretch from this point leads to a wastage of resources and costs, which leads to loss of revenue. So, it is at the point where marginal cost meets marginal revenue that indicated a perfect balance of the cost of production and the revenue realized from the sales of the goods, which represents the maximum profit since cost meets revenue.